The global economy is in serious danger

Pepperman · Post by **Pepperman** » 09 Oct 2015, 18:01

Lawrence Summers is a professor at and past president of Harvard University. He was treasury secretary from 1999 to 2001 and an economic adviser to President Obama from 2009 through 2010. His Twitter handle is @LHSummers.

As the world’s financial policymakers convene for their annual meeting Friday in Peru, the dangers facing the global economy are more severe than at any time since the Lehman Brothers bankruptcy in 2008. The problem of secular stagnation — the inability of the industrial world to grow at satisfactory rates even with very loose monetary policies — is growing worse in the wake of problems in most big emerging markets, starting with China.

This raises the specter of a global vicious cycle in which slow growth in industrial countries hurts emerging markets, thereby slowing Western growth further. Industrialized economies that are barely running above stall speed can ill afford a negative global shock.

Policymakers badly underestimate the risks of both a return to recession in the West and of a period where global growth is unacceptably slow, a global growth recession. If a recession were to occur, monetary policymakers would lack the tools to respond. There is essentially no room left for easing in the industrial world. Interest rates are expected to remain very low almost permanently in Japan and Europe and to rise only very slowly in the United States. Today’s challenges call for a clear global commitment to the acceleration of growth as the main goal of macroeconomic policy. Action cannot be confined to monetary policy....

https://www.washingtonpost.com/opinions ... story.html

biffvernon · Post by **biffvernon** » 09 Oct 2015, 18:42

Excellent news. Must be time to discover the virtues fo a steady-state economy or even degrowth.

Little John · Post by **Little John** » 12 Feb 2016, 07:51

World trade has now collapsed back to and even below 2008 levels when this all initially kicked off.

Very interesting year ahead.

emordnilap · Post by **emordnilap** » 12 Feb 2016, 10:39

biffvernon wrote:Excellent news. Must be time to discover the virtues fo a steady-state economy or even degrowth.

'Growth' is mentioned 19 times in that article, every one of them unconnected with how I understand the word.

johnhemming2 · Post by **johnhemming2** » 12 Feb 2016, 10:48

It would be nice if we could move the conventional wisdom towards the idea that continual growth in resource consumption is not practical.

UndercoverElephant · Post by **UndercoverElephant** » 12 Feb 2016, 12:08

johnhemming2 wrote:It would be nice if we could move the conventional wisdom towards the idea that continual growth in resource consumption is not practical.

Almost correct, but you got the last word wrong. Continual growth isn't merely impractical. It's impossible.

snow hope · Post by **snow hope** » 12 Feb 2016, 15:09

I don't like the word degrowth. in fact I don't think it is even a proper word, To me it is an oxymoron.

Is the opposite of growth not decline?

I think anybody brought up in the world with anything to do with economics simply can't get their head around the fact that growth has come to an end due to TLTG and we now have to completely change the economic basis/model to cater for decline.

To the Economics people, decline is an anathema!

UndercoverElephant · Post by **UndercoverElephant** » 12 Feb 2016, 15:49

snow hope wrote:I don't like the word degrowth. in fact I don't think it is even a proper word, To me it is an oxymoron.

Is the opposite of growth not decline?

Not really.

"Growth" is a word that doesn't have a straightforward antonym in English, the reason being that most things that grow do not suddenly start shrinking. They get old, deteriorate, die...but they don't usually get smaller. So there was no need for such a word. The antonym of "decline" is "progress" or "improve(ment)", not "growth".

If you don't like "degrowth" then maybe the next best word is "shrinkage", but in this case I think that is a missed opportunity. What we really need is a transition to a new sort of economy, and an overall shrinkage in economic activity is not actually the primary goal. What we really need is to free the economy from dependence on growth. The goal needs to be economic sustainability. That term needs replace both economic growth and sustainable development as what we are aiming for.

Post by **kenneal - lagger** » 12 Feb 2016, 15:49

snow hope wrote:...... To the Economics people, decline is an anathema!

It much worse than that, it's Armageddon!

Post by **kenneal - lagger** » 12 Feb 2016, 16:05

What we need is "Sustainable Growth" but not in the form that economists think (I'm not really sure what they mean by sustainable Growth and I'm not sure they do either) but as happens in nature. In nature things grow steadily to a certain size then plateau for a while before shrinking back of even dying. When they shrink or die the bits no longer needed are recycled into the next growth phase.

Things that keep on growing without check usually become diseased and are knocked back heavily or die out completely but again the residue is recycled. So, some of our banks and corporations need to be allowed die so that the useful bits can be reused and the rest recycled.

Really what I am saying is that we need to get back from Corporatism to Capitalism but with a limit on the size of businesses and a ban on taxpayer rescues. We will also have to have a strong representation for natural capital in the balance sheet. That, together with high material costs, as those materials are costed at their full environmental cost, will get us away from mass production of crap to the small scale batch production of high quality items with a long life and repairability built in.

Oh! the other thing required will be an Islamic banking system or even a Christian one as it was before usury was allowed. I'm afraid that the Jews will lose our here as they again become the pariahs who charge interest!

vtsnowedin · Post by **vtsnowedin** » 12 Feb 2016, 20:11

The need for growth comes in large part from the 85 million new people we add to the world each year. We must create food clothing and shelter for them and if we cannot find new sources of commodities for them we must take a reduced share of the commodities available. At present that reduction is 1.13 percent per year. Eventually we will reach a point where we are unwilling to get by with less and then some very bad things will happen to the weakest and unluckiest of the worlds peoples.

Post by **kenneal - lagger** » 13 Feb 2016, 06:29

I think that you will find, VT, that the banking system is the real driver of growth as there is only as much money in the system at any one time as is required to pay off the capital on a loan. The interest requires that more money is earned so that it can be repaid; hence the requirement for growth. The increase in population is largely in the third world where monetary and resource requirements are very limited indeed.

johnhemming2 · Post by **johnhemming2** » 13 Feb 2016, 08:41

This, of course, depends firstly upon definitions of money. I would be interested in seeing any calculation that substantiates this hypothesis. I know it is part of a conventional wisdom, but I don't think generally it is true.

What is true is that governments assume growth in GDP as part of financial planning and this is required to pay off sovereign debt. It clearly is not a part of all private financial planning. For example mortgage finance is not always predicated on individuals increasing their income. (Sometimes it is).

In that some debt finance is not dependent on growth it is logically the case that not 100% is dependent on growth.

At the same time government planning tends to rely on growth. Much more severe austerity would be needed if that were not the case. This is one of my big issues with the Green Party as the Green Party opposes austerity, but supports policies that require more of it. In some senses Jeremy Corbyn has a similar approach although more nuanced (ie Nuclear Boats without missiles).

vtsnowedin · Post by **vtsnowedin** » 13 Feb 2016, 12:00

kenneal - lagger wrote:I think that you will find, VT, that the banking system is the real driver of growth as there is only as much money in the system at any one time as is required to pay off the capital on a loan. The interest requires that more money is earned so that it can be repaid; hence the requirement for growth. The increase in population is largely in the third world where monetary and resource requirements are very limited indeed.

there is only as much money in the system at any one time as is required to pay off the capital on a loan.

Not true. The value of stock shares and other instruments are also money and often not created by a loan but by a investment of past profits. The drop in the stock markets this year has wiped out several trillion of this money with no loans being repaid. Interest comes from profits but not all profits are interest.
That growth in the third world is where a lot of our commodities are insitu and we have to pay to get them out of the ground and shipped to us. Also a third world person needs just as much food and water as a westerner and at 85 million each year even if kept at starvation levels of poverty will reach the limits of world resources and may already have witnessed by current levels of regional wars and migration of refugees.

Lord Beria3 · Post by **Lord Beria3** » 15 Feb 2016, 21:22

Two great articles on the worrying collapse in bank stocks at the moment...

http://www.peakprosperity.com/blog/9670 ... link_96701

Financial markets the world over are increasingly chaotic; either retreating or plunging. Our view remains that there’s a gigantic market crash in the coming future -- one that has possibly started now.

Our reason for expecting a market crash is simple: Bubbles always burst.

Bubbles arise when asset prices inflate above what underlying incomes can sustain. Centuries ago, the Dutch woke up one morning and discovered that tulips were simply just flowers after all. But today, the public has yet to wake up to the mathematical reality that over $200 trillion in debt and perhaps another $500 trillion of un(der)funded liabilities really cannot ever be paid back under current terms. However, this fact is dawning within the minds of more and more critical thinkers with each passing day.

In order for these obligations to be reset to a reality-based level, something has to give. The central banks have tried to modify the phrase “under current terms” by debasing the currency these obligations are written in via inflation. Try as they have, though, they’ve been unable to create the sort of "goldilocks" low-level inflation that would slowly sublimate that massive pile of debt into something more manageable.

http://www.peakprosperity.com/insider/9 ... -has-begun

Executive Summary
Oil patch defaults will be the trigger that burns down the markets
Defaults will ripple widely across many industries and sectors
The banks are suddenly turning on their central bank brethren
How to protect yourself from the coming era of wealth destruction